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SLO City Council to Consider Ballot Measure to Establish Cannabis Business Tax

Post Date:05/11/2018 3:00 PM

The San Luis Obispo City Council on Tuesday will consider a draft ballot measure to establish a cannabis business tax. The item is a study session and will allow the Council to provide direction and feedback before deciding to place the measure on the ballot.

Following voter approval of Proposition 64 (the Adult Use of Marijuana Act) during the November 2016 election, City staff engaged with the community to develop an ordinance establishing standards and regulations for cannabis cultivation and permitted cannabis business activities in the City. The ordinance was introduced by the City Council on May 1, 2018.

The ordinance includes a provision that cannabis business operations will not be allowed in the City until a cannabis business tax is approved by voters. City staff reviewed several options for cannabis taxes that cities and counties in California have passed and their rate levels. The proposed general purpose tax would include a combination of the two most common tax structures throughout the state: a gross receipts tax of up to 10 percent and a cultivation tax of up to $10 per canopy square foot. These reflect the maximum levels of tax that would be allowed, but initial rates will be lower and the City Council would have the authority to lower or not increase them should it be determined it is in the best interest of the businesses and the City.

Gross receipts, or excise taxes, are assessed at every stage of cannabis production within City including testing, retail sales, distribution and manufacturing. Cultivation taxes are based on the size of the canopy or license issued by the State.

The proposed business tax could raise approximately $1,500,000 annually and would be in effect until ended by voters.

Following City Council’s review and discussion surrounding the proposed cannabis business tax at Tuesday’s meeting, Council will return on June 5, 2018 to decide if a measure would be submitted to the voters of the City at the General Municipal Election to be held on November 6, 2018.